How Elon Musk could shock the world on tonight’s conference call

Warn that tariffs would cause Tesla to lay off a majority of its US workers

This is my highly speculative prediction, for which I have zero sources other than my own imagination -- but I have to get it off my chest before it’s too late:

Tesla is scheduled to report Q1 2025 financial results after the close of market today, and because we already know how disappointingly few cars Tesla sold in Q1, analysts have drastically reduced their estimates once again -- just like almost all the other Tesla quarters during the last two years. The big headline story that will dominate the news, however, will be something almost entirely different.

I will get straight to the point: Instead of typing up the reasons for why I believe Musk will say what I think he might say tonight, I am simply writing it in the format of his script, as I envision it to be delivered tonight:

TESLA RESTRUCTURING

Elon Musk: “Tesla is facing challenges from cost pressures, resulting from the higher tariff environment. Our cars consist of parts that are sourced globally, and those parts in turn consist of other parts, also sourced globally. We are now facing tariffs of various overlapping types, from 5% to 10% to 20% to 25% to 145% and so forth, as they introduce themselves into our production food chain.

As you can see from our financial report, our gross margin is barely 15%. These new tariffs will hit our margin structure most painfully, unless we raise prices, which would reduce demand. We have yet to assess the full impact of these tariffs, as many prices have yet to adjust, and it could take a couple of more months for them to adjust fully. We expect a full adjustment could be in place by July.

These tariffs could make it uneconomical to produce cars in the US, which will mean that we have to scale back production plans in our California and Texas factories. Unless these tariffs are rolled back and hopefully abolished permanently, we need to prepare ourselves and the market for an estimated 70% layoff scenario. Yes, we would need to lay off approximately 70% of our production workforce if the tariffs now contemplated fully take into effect within the next 90 or so days.

If this happens, then we will likely execute on this 70% reduction in force starting in August-September. It will be the unfortunate effect of these new higher tariffs. The consumer simply cannot maintain the same level of demand with these new higher tariffs in place. And we cannot survive on a gross margin much lower than 15%.

What about our factories in China and Germany? The global spillover effects of these tariffs are likely going to be more than 0% even under the mildest tariff increase scenario. At this point we are not anticipating anywhere near the 70% layoffs we estimate for our US factories, but it will likely be something more than 0% in our German and Chinese factories.

It is very unfortunate that these tariffs will increase our costs for steel, aluminium, and numerous parts and modules manufactured both in North America and from around the world. The fact that we manufacture so many of our cars right here in The United States of America does not insulate us from these higher costs.

Let’s hope for the sake of our employees that the tariff increases that have already taken into effect, will be abolished, and that the upcoming tariff increases that have been scheduled, will not take into effect. If they are all rolled back, we believe that we will be able to keep the vast majority of the otherwise 70% laid off employees come this Fall.

My name is Elon Musk and I approve of this message.”

Why this action?

It is well-known that Elon Musk is extremely opposed to tariffs. Anyone who knows Economics 101, or is involved in manufacturing, knows how harmful tariffs are to the consumer. Musk has likely pointed this out to President Trump behind the scenes hundreds of times, but clearly to no avail.

Musk is a bit reluctant to criticize President Trump openly in public. Musk enjoys a unique and close relationship with President Trump, which he would like to maintain for obvious reasons.

So how to do it, if you were Musk? And by “it” I mean convince Trump that tariffs will sink the economy. The most effective way seems to use Tesla as the “test case” or “example” of what will soon spread throughout the US economy if the tariff madness isn’t put back in the bottle extremely quickly.

Two other points:

1. Tesla would likely have to scale back production anyway, given the competitive realities and any reduction in the EV mandates globally, especially in the US first but then also in Europe.

2. Musk could simply change his mind if the tariffs went away in the next couple of months. No harm, no foul. For those of you with good memories, you will recall that it was in February 2019 that Elon Musk announced that Tesla would close all of its retail stores. Then, barely a couple of weeks later, he forgot about the whole thing and no stores were closed. So, first tell the world that 100% of Tesla’s stores would close, and then close 0% of them. The whole thing was quickly memory-holed by almost everyone (but not me).

Here is a link to Tesla’s retail closure situation in February-March 2019:

And here are some additional links to the same saga: